By Shares of major telecommunications companies, including AT&T, Frontier Communications, and Lumen Technologies, continued to plummet following a recent investigation by the Wall Street Journal. The investigation revealed that these companies have neglected a network of cables that are coated in toxic lead.
In morning trading, AT&T stock dropped by 4.4%, reaching its lowest level in three decades. Shares of Frontier fell by 8.8% to $13.04, while Lumen stock experienced a 3.5% decrease to $1.78. Verizon Communications also saw a decline of 2.1% in its shares.
The losses from Monday add to an already turbulent week for the sector. Even before this latest investigation, AT&T, Verizon, Lumen, and Frontier collectively lost $18 billion in market capitalization, as reported by analysts Craig Moffett and Nick Del Deo from MoffettNathanson.
The analysts expressed concern about a potential decline in telecom purchasing activity, stating, “We could see what amounts to a general telecom buyer’s strike for some time.”
TD Cowen analysts cautioned that it is currently too early to predict the financial consequences resulting from the issues exposed by the Wall Street Journal investigation. However, they acknowledged that significant repercussions are likely to persist in the foreseeable future. They anticipate a lengthy process filled with political disputes, as well as potential class-action and attorney general lawsuits related to the lead contamination in the cables.
Analyst Downgrades AT&T, Frontier, and Telephone & Data Systems
Analysts at Citigroup have recently downgraded AT&T, Frontier, and Telephone & Data Systems, citing concerns over the fallout from lead-covered cable issues. While the exact impact of these issues remains uncertain, analysts anticipate that they will continue to weigh down on the companies’ stocks in the near term.
Concerns over Lead-Covered Cables
Last week, NewStreet Research analyst Jonathan Chaplin estimated that the nationwide removal of all lead-cased copper wires could cost a staggering $59 billion. This estimation comes in the wake of a Journal investigation, which uncovered more than 2,000 old lead-encased phone cables left behind by phone companies across the United States. These cables were found hanging on poles, submerged in waterways, and buried in soil.
Potential Environmental and Public Health Impacts
Tests conducted by the Journal revealed that these abandoned cables are leaching lead into soil and water at levels that exceed regulatory safety guidelines. In response to these findings, AT&T and USTelecom, an industry group, have launched webpages disputing the environmental and public health impacts of lead cables. They claim that the safety of such cables is supported by studies and scientific evidence. However, they have not provided the Journal with any of these studies nor included them on their websites. Additionally, they have refused to disclose the full extent of lead cables within their networks.
As the fallout from the lead-covered cable issues continues to unfold, it is clear that potential risks and costs associated with addressing this problem remains a concern for analysts and investors alike.
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